Court Supports Anderson Appeal. Anti-Trust Suit Against Publishers and National Distributors Will Proceed

Last week, a United States Court of Appeals upheld the motion of Anderson News and vacated an earlier decision of the United States District Court for the Southern District of New York that had dismissed the former wholesaler’s anti-trust suit against magazine publishers, national distributors, and a wholesaler. The original case was dismissed in August, 2010 (The New Single Copy, 8/9/10). Anderson brought the suit in the Spring of 2009, after nearly all of its supply of magazines was cut off and, consequently, the wholesaler suspended operations. The defendants in the suit are American Media, Inc., Bauer Publishing Co., Curtis Circulation Company, Distribution Services, Inc., Hachette Filipacchi Media, U.S., Hudson News Distributors, Kable Distribution Services, Rodale, Inc., Time Inc., and Time/Warner Retail Sales & Marketing. The Court’s ruling expresses “no view as to the merits of Anderson’s claims,” but does mean that the suit will proceed. As of last Friday, a schedule has not been set.

As a result, the events of early 2009 which caused massive disruptions in the magazine distribution channel, are back in the news and their resolution is far from settled. In mid-January of that year, Anderson, then estimated to be the second largest magazine wholesaler with a market share of more than 20%, notified publishers it would require a seven cents a copy distributed surcharge, and if publishers did not agree to the charge, copies would not be delivered to retailers in February. Anderson also said publishers would have to assume the cost of the magazine inventory in retail accounts receiving scan-based-trading (SBT) services. Source Interlink Companies, then the largest wholesaler, followed by threatening a similar, although not identical, surcharge. After a hectic period of activities, including Source Interlink claiming that it had rescinded its demand, Anderson and Source found themselves without nearly 80% of their magazine supply by the first week of February. Source obtained a U.S. District Court restraining order and began receiving supplies within a short period. Eventually, Source signed contracts guaranteeing magazine supplies with the national distributors. Anderson did not seek such an order and on February 7, 2009, announced that it “suspendednormal businessactivitieseffectiveimmediately.” The company did not resume operations and shortly thereafter filed its anti-trust suit. (Most of these events and the subsequent realignment of the channel were covered in editions of The New Single Copy published in late January through March of 2009).

The defendants in the suit include many major publishers, three of the four major national distributors, and one of the three large wholesalers. The national distributor Comag Marketing Group (CMG), in 2009 a partnership of publishers Conde Nast and Hearst Magazines, had a distribution contract in place with Anderson and Source Interlink and, as a result, did not terminate supplies. The News Group was a partner with Anderson News in a logistics provider, Prologix, and subsequently agreed to buy some Anderson facilities. It is now the largest wholesaler. Source Interlink Companies, then a public company, filed for bankruptcy in the spring of 2009, and emerged a private company, owned by its investors, later that year. A notable development coming out of the period is that there are now contracts between national distributors and wholesalers guaranteeing magazine supply as long as wholesalers fulfill specified obligations.

Within the past three months, the Jim Pattison Group, parent of The News Group, bought Comag from Hearst and Conde Nast. In late March, a division of Hudson Media, parent of Hudson Distributors, became a partner in Comag with the Pattison Group.

Today, Anderson Media Corporation, which Anderson News was part of, through several entities, is a major distributor of DVDs, recorded music, and books, and maintains other businesses, including a magazine distribution service to book stores, warehouse club stores, and other retail categories. On its website, www.andersonmediacorp.com, it refers to the events of early 2009, and the filing of the anti-trust suit. It notes that the Anderson family “has committed more than $10 million to this action.”

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About Me

Scott Bullock is a veteran circulation expert with over 38 years experience in both Canada and the United States.
He has worked on trade titles such as Publisher’s Weekly, Library Journal, School Library Journal and Small Press in the USA.
In consumer magazines, Scott was the Circulation Director for D Magazine (the city magazine of Dallas, Texas), and in Canada he was the Circulation Director for Toronto Life, Fashion, and Canadian Art.
From 2000 to 2004, Scott was a partner at Coast to Coast Newsstand Services.
Scott has also held the post of VP Sales & Marketing, for CDS Global, Canada.
Currently, CoversSell.Com is Scott’s circulation consultancy. Active clients include: Fly Fusion, Canadian Geographic, Canadian House & Home, Canada’s History, Canadian Real Estate Wealth, Canadian Woodworking, Canadian Cycling, Canadian Running, Canadian Scrapbooker, Legion, Harrowsmith, SkyNews, and SuperTrax.